During the last fiscal year trade between India and China reached $51 billion. This year that number is expected to reach $60 billion. That is an impressive increase, given that in 2005 trade stood at $15 billion. However, China's economy has been more prosperous over this period than India's, which is currently facing a $19 billion trade deficit. One of the primary goals of this trade agreement is to reduce that deficit and provide India with better market access for its exports to China.
Trade relations between India and China have been rocky over the years as India has imposed strict antidumping duties on Chinese imports. "Dumping" occurs when a country exports a product at a lower price than it would charge in its home market. India's antidumping duties were the highest of any country in the World Trade Organization last year to protect itself from China’s alleged artificially low prices. China has reciprocated by objecting to India's regulation of sourcing power and telecommunications equipment, alleging that they discriminate against Chinese producers.
In spite of an increasingly strong economic relationship, other contentious issues still exist between India and China. Included among these issues are a long-standing border dispute, China's military build-up along the border, and India's support for the Dalai Lama. Prime Minister Singh seems hopeful that this trade partnership may help them resolve some of these issues, stating that the agreement "will contribute to long term peace, stability, prosperity and development in Asia and the world."
Discussion Question: Do you think that a stronger economic partnership between India and China will help the two countries resolve long-standing political issues?